Three Pricing Techniques Startups Should Use for Product Integrations

Three Pricing Techniques Startups Should Use for Product Integrations

Startups need to carefully consider each integration’s price point before deploying it. According to Shensi Ding, CEO & co-founder of Merge, selecting the optimal pricing strategy for a business might be challenging, but it can be made easier by thoroughly examining the options.

It takes a lot of money to build product integrations, or any interface between a product and third-party systems, usually via APIs. This is particularly true for startups with little funding for engineering.

Startups must determine the best price strategy for their integrations in order to guarantee that the investment is profitable.

It can be difficult to decide on this. A startup that overprices its integrations runs the risk of seeing low adoption; conversely, if it underprices them (or includes them in its subscription plans), it runs the risk of losing money.

While there’s no one-size-fits-all method for pricing product integrations, entrepreneurs can often opt for one of three approaches.

1. Price Integrations at No Cost

It is not a good idea to include integrations at no extra cost with subscriptions.

It probably takes a startup’s developers multiple sprints to construct a single integration, from scoping the build to coding, testing, and documenting. Furthermore, these interfaces will eventually malfunction, requiring the engineers of the firm to continuously monitor the integrations and address any problems as soon as they appear.

All of which is to say that creating and maintaining integrations may be very expensive, and what good are they if they don’t bring in more money?

Nonetheless, a lot of firms think that the increased customer retention that comes with providing the integrations can more than make up for the time and money needed to develop and manage them.

One business offering HRIS interfaces for “free” is Allwhere, an IT asset management platform for remote teams. “Our integrations are a great way to get clients onboarded into our product quickly and experience a fast time to value, so we think our integrations will ultimately pay for themselves through improved customer retention,” says Jimmy Jameson, Product Strategy and Operations Lead at allwhere.

Let’s say that a startup experiences difficulties with customer retention, as many do, and that integrations provide substantial benefits to their customers. If that’s the case, they ought to test this tactic as soon as possible to observe if it increases the likelihood that their clients will renew.

2. Varying Prices for Integration Areas

In order to support more use cases, startups frequently provide connectors for a variety of software categories. A startup might provide, for example, file storage integrations to allow customers to sync documents to and from their product, ticketing integrations to help customers sync tickets with their platform bidirectionally, HRIS integrations to help customers provision and deprovision users automatically, and the list goes on.

This forces startups to consider if each integration category warrants the same price point, which further complicates their pricing selections. If not, they will have to determine how much to charge for each group.

A startup may choose to charge various prices for each category if it meets the following criteria:

  • Some integrations are necessary for the startup’s product to work, so they can offer it for “free,” but other integrations are optional, so they have to charge for it.
  • Because it costs more to develop and maintain an integration in one category than another, the startup will charge more for such integrations. This might be the case if the startup isn’t outsourcing certain integrations to a third-party service, or if the integrations for that category are more challenging to develop and maintain.
  • Higher businesses typically have higher budgets, therefore they’ll probably be willing to spend more money. Larger businesses also employ specific integrations more frequently.
  • The third situation is best shown by Siit, an internal helpdesk program for HR and IT departments. Ticketing integrations are more expensive than HRIS integrations.

This is because “larger companies tend to use one set of applications (e.g., ERP systems) over another (e.g., HRIS solutions),” says Anthony Tobelaim, their CPO and co-founder.

Similar to this, Causal, a financial planning tool, charges more for ERP integrations than for HRIS integrations. It’s because “Companies that use enterprise-grade accounting systems, like Netsuite, for instance, are often larger and have bigger budgets than, say, those that solely need HRIS integrations,” according to Causal co-founder Lukas K√∂bis.

3. Increasing the Volume of Integration in Tiers

Lastly, in order to entice customers and potential investors to invest in their more sophisticated plans, firms may choose to offer extra integrations; this decision also enables the startup to immediately recoup the costs of adding new connectors.

There are several circumstances where this tactic can be justified:

  • The startup’s integrations are an extra bonus rather than a necessary component for getting value out of their offering.
  • Customers and potential customers frequently request several integrations; their desire to integrate into your product may surpass the extra costs associated with gaining access to them.
  • Each integration requires a starting point resource and time investment that increases gradually, if not exponentially. The strategy may enable the startup to recover a portion of its additional investment.
  • when customers and potential customers have no incentive to transfer to a rival based on integration prices, meaning that competitors either don’t provide the integrations the firm is considering adding to their higher-tiered plans or do so in their more advanced plans.

This tactic is implemented by Causal, the previously stated financial planning tool. via their “Launch” plan, they offer one integration, and via their “Growth” plan, three integrations. Additionally, the business lets customers buy additional integrations individually.

Making Sense of the Integration Pricing Choice

Pricing decisions made by startups are very context-dependent. The price a startup should charge for each integration depends on a number of factors, including how they develop and maintain the integrations, the resources and support they can access from the third-party API, the perceived value and demand of each integration, and the kinds of organizations that would use the integrations.

As a result, even though the tactics in this article might act as a guide, every firm must conduct thorough research before making the best choice for its particular circumstances. They can continue iterating after that.